Game Theory and its Role in EPNS.

Game Theory as the name suggests is not just limited to games. Game theory studies how the decisions are made and what is the reasoning behind such decisions. Even though the game theory is used in several disciplines it is the most used in the study of economics. It is based on the mathematical models of cooperation, conflict, coordination, or interaction between people in any domain even in business.

The Game theory was identified as a unique field when mathematician, Jon von Neumann published his paper on the Theory of Games of strategy in 1928 and the theory gained more traction after his book, co-authored with Oskar Morgenstern, Theory of Games and Economic Behaviour was published in 1944.

During the Cold War period, US soldiers and Soviet Union soldiers were studied to understand their strategies and the reasoning behind such strategies, and that was viewed as an exercise in game theory.

All the instances where decisions are taken based on the valuing of likely outcomes are considered as ‘games’ since choices are made depending on the possible outcomes of the choices made.

It is an abstract theoretical framework built around the social situations amongst competing players. It studies the strategies implemented by rational players while competing against each other. It assumes that players will use the optimal pay-off strategies and such pay-off strategies are dependent or contingent on the strategies executed by their opponent.

It is assumed that the best possible pay-off strategy will be implemented and all the players are rational. And the outcome of each player’s strategy is interdependent on the choices and strategies of all the players involved in the game.

Let’s take a look at the definitions involved in the Game Theory:

A. Game – Any situation where the outcome is dependent on the strategies and decisions of two or more players aka decision-makers

B. Players – People who are in charge of making decisions in the game

C. Strategy – Actions and decisions are taken by a player while facing different situations arising in the game

D. Payoff – Payout or any kind of compensation received by a player after attaining the particular outcome (can be in any quantifiable form eg. utility or dollars)

E. Information Set – Data or information obtainable at any point of the game

F. Equilibrium – Position where all players have executed their strategies and an outcome has been attained

Initially, the game theory focused on two-person zero-sum games in which the gains and losses of each player are equally offset by the other player’s gains and losses. Now, game theory is an umbrella term for the study of the science of rational and logical decision-making in people, computers as well as in animals.

The Nash Equilibrium

Named after its creator an American mathematician, John Nash, Nash equilibrium of one of the most important concepts in Game Theory. Nash Equilibrium is reached when the initial strategy of any player does not deviate throughout the game and the players can achieve the desired outcome. Once the Nash Equilibrium outcome is attained, none of the players’ unilateral decisions can increase their payoff.

Each game can have more than one Nash Equilibrium. This generally occurs in complex games where more than two players are involved and more than choices are made. In some cases, it takes trial and error to reach equilibria. The prisoner’s dilemma is a classic example of the Nash Equilibrium in the Game Theory.

Prisoner’s Dilemma

In this game, two prisoners are arrested and both of them are kept in different cells far away from each other with no option of communicating with each other. There isn’t enough proof from the prosecutor to convict either of the prisoners for the crime committed by them. The prosecutor offers each prisoner a proposal to spill the beans and betray the other prisoner by testifying that the other prisoner committed the crime or remain silent and cooperate.

Now, if both of them betray each other and testify against one another then both will be convicted. If one prisoner betrays the other then he will be set free and the other prisoner will serve jail time. But if both of them remain silent then they both serve jail time.

The Nash Equilibrium in this case will be reached when both prisoners betray each other. If anyone betrays then the possible outcome for the other will be worse.

Game Theory in Decentralized Blockchain

Blockchain runs on collaborative technology that succeeds on the basis of coordination and when the members of the blockchain act in concert. The members of the Blockchain act with a self-gain motive but while doing so they contribute to the overall success of the Blockchain.

Owing to the concept of Nash Equilibrium in a non-zero-sum game, the rewards or incentives can be fashioned in such a way that any step taken by them for self-gain will have an outcome where all the participants in the ecosystem will incur gains.

For example, Bitcoin miners are rewarded in Bitcoin for their contribution made towards the securing of the Bitcoin Blockchain but Bitcoin mining is intentionally made difficult so that malignant threats and hackers cannot harm the mining process.

Therefore, the role of game theory is vital in the governing protocols on the Blockchain and making sure that everyone on the Blockchain acts in such a way that the protocol benefits and advances further.

Role of Game Theory in EPNS

All users of EPNS receive incentives due to the design in which the EPNS protocol is made that provides for effective governance.

The more users a protocol has, the more the fees pool increases due to more services provided, and this increases the incentives received by EPNS users which will have a direct impact on the Token Utility.

As per the EPNS Whitepaper, PUSH is the governance token of EPNS which is used to manage the core functionalities of EPNS.

Part of the fees pool is disbursed amongst the users of the EPNS Protocol.

The incentives on the EPNS protocol are different for different ecosystem participants:

A. Service Providers- The current notification game is bettered by EPNS and the service providers are already incentivized to send notifications bringing them at par with the Web 2 experience.

B. Users – Users receive notifications related to payments, DeFi etc. they also incentivize by receiving token incentives from notifications.

C. Wallets/Infra Services

D. Existing Wallets – They constantly receive perpetual shares from integration pool partners

E. Future Wallets- As users increase so does the protocol fees pool, future wallets are in return attracted to participate and claim rewards from the protocol

Thus game theory helps in aligning the stakeholder incentives on the EPNS Protocol which improves the network protocol and attracts more users toward the EPNS protocol.

EPNS-decentralized notification protocol, incorporates game theory to create a win-win situation for all the users on its platform, whether they are users, services, wallet providers, or token holders thus proving that game theory plays a vital role in the EPNS protocol.

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